How to Open a Pot Shop in Washington State

Start a Washington BusinessStart an LLCStart a CorporationStart a NonprofitObtain Nonprofit Tax ExemptionRegister a Charity

Expanding

Register a Foreign LLCRegister a Foreign CorporationRegister a Foreign Nonprofit

Managing

Washington Annual ReportWashington TaxesAmend Articles of OrganizationAmend Articles of IncorporationRevive an LLCReinstate a CorporationGet an ApostilleGet a Certified CopyGet a Certificate of Existence

Closing

Dissolve an LLCDissolve a CorporationWithdraw a Foreign BusinessResign as a Registered Agent

STEPS TO STARTING A RETAIL MARIJUANA STORE IN WASHINGTON STATE

Exploring the possibility of investing in or purchasing an existing marijuana retail store? Waiting for the Washington State Liquor and Cannabis Board (WSLCB) to reopen applications for new licenses? Either way, the information below will let you know the steps you need to take to stay in compliance with Washington’s marijuana laws.

Step 1: Plan

Once you’ve decided that you want to open a store that sells cannabis for recreational use in Washington, you need to hammer out a business plan. This plan should include your financing plan, market analysis, marketing plan, operations plan (including where/who you’ll be getting your product from), as well as what will separate your store from the competition. There’s only a few years’ worth of comparative data, so planning can be tough. You can, however, study existing businesses and laws to make sure your plans fall within the bounds of the state’s rules.

To get or maintain a marijuana retail license, your business is required to have planned protocol for each of the following:

Security

Traceability

Employee qualifications and training

Destruction of waste products

What type of products will be sold and how the products will be displayed to customers

Step 2: Find the Right Location

The old adage of “location, location, location” will certainly play a part in the success of your cannabis store, but aside from finding a convenient and attractive space for customers, your business will also need to meet the state’s requirements. Already have a great location? It’s still important to keep current on the rules in case you ever want (or need) to upgrade your location.

Your cannabis shop needs to be located at least 1000 feet from any elementary or secondary school, playground, recreation center or facility, child care center, public park, public transit center, library, or game arcade that allows minors to enter. Finding a location that meets all this criteria can be hard for cannabis shops in dense, urban areas. Taking this into consideration, counties and municipalities (as of June 2015) have the right to enact an ordinance reducing the 1000 ft buffer to a minimum of 100 ft (with the exception of elementary schools, secondary schools and playgrounds). Olympia Ordinance 7046, for example, reduces the buffer zone in the state capital to 500 feet.

Not everyone is excited to have a pot shop in their neighborhood. Local authorities will be notified of where you plan to open up shop and have an opportunity to object. Some Washington cities don’t allow marijuana businesses at all, including Leavenworth, Poulsbo, Pomeroy, Othello, and Richland.

Step 3: Get the Money

It doesn’t matter if you’re starting a new shop, investing in an existing company or buying a whole business: you’ll need money. What makes financing a pot shop more difficult than other businesses is that entrepreneurs may be hard-pressed to find financing options through traditional methods. Due to federal banking restrictions, banks may not want to offer a small-business loan to a “risky” venture existing in a federal gray area. As a result, you may need to seek out investors.

When pot shops first opened in the Evergreen State, financiers were limited to Washington residents who had lived in-state for at least three months. Out-of-state financiers are permitted now, but you have to apply, submitting an Application for Additional Funding to the WSLCB and waiting for approval. Out-of-state financiers must be US residents.

Step 4: Choose a Business Entity

At the moment, you can’t just start a new business and apply for a new marijuana retail license. The WSLCB has put a hold on issuing new licenses. So, to enter the industry, you’ll have to invest in or buy an existing licensed business. Some licensed retailers are LLCs, some are corporations, and some may even be sole proprietors. It’s important to understand the effects these different business types can have on your marijuana retail dreams.

If you’re considering a sole proprietorship, realize that you personally will have unlimited liability. You are the business. There is no legal separation between you and your personal assets and the assets of your business. What this means for you is that you are personally responsible for all debts or actions on behalf of your business. Your assets are on the line in the case of a lawsuit or unpaid bills.

If you are operating an LLC, there is limited liability. This means that your personal assets are generally protected in case your LLC were to be sued or fall under any other financial or legal burden. It’s usually only the assets of your LLC that would be at risk, not yours personally. However, the corporate veil can be pierced and your assets can be at risk with poor business habits. For instance, if you were to put a personal dinner on your business account, or buy a big screen TV under your company’s name and take it home, this would give a plaintiff a foothold in coming after your personal assets. So with an LLC, your personal assets are protected, but it is not ironclad, bullet-proof protection.

If your business operates as a corporation, you will benefit from limited liability as well. The personal assets of shareholders who have purchased your corporation’s stock are usually only responsible for their own stock investments. The corporation, since it is considered its own separate business entity apart from shareholders and owners, is legally responsible for itself. Debts, etc. do not fall onto the shoulders of individuals, but rather onto the corporation as a whole, separate entity. A corporation’s corporate veil can also be pierced, so you need to take in the same considerations as with an LLC when deciding which entity is right for your cannabis business.

For more information on differences between an LLC and a corporation, click here.

Step 5: Hit All the Requirements

No government authority will be kind to you if you open up shop without meeting all the requirements. Before opening your doors, the top regulatory requirement on your list needs to be obtaining a marijuana retailer license. If you’ve completed the previous four steps, you should be in a good position.

The marijuana retailer license application is only a small addendum to the Master Business License application. Even if you’re not filling out the application (if you’re investing in or buying an existing marijuana business), you’ll still need to have some of the same key information readily available, including:

Criminal background checks on financiers, owners, and their spouses

Government-issued identification for all financiers, owners, and their spouses

A financial statement accounting for all money invested in the business

Copies of bank statements and recent tax returns

After you’ve obtained your marijuana retailer license and gotten your shop in order, you should finally be ready to turn on that neon “open” sign and hopefully do well in this new era of cannabis.

What’s the cost of the Washington marijuana retailer license?

The annual license and renewal fee went down to $1381 in July 2018. New licenses (which may eventually be a reality again) have a $250 nonrefundable application fee.

Can I apply for a new Washington marijuana retailer license?

Not currently. The WSLCB isn’t taking new applications and has no plans as of yet to do so.

Can I buy a Washington marijuana retailer license from an existing business?

Not directly. A business can’t buy or sell a license to another business because the licenses themselves aren’t transferable assets. You can, however, purchase a business entity that holds a license. When investing in or buying an already-licensed business, be sure to file a Change in Governing People, Percentage Owned and/or Stock/Unit Ownership form ($75) with the WSLCB. You’ll also have to submit forms (which vary depending on business entity) to the Secretary of State indicating changes in governors and owners.

Just note that when you buy a business, you don’t just get the good stuff. You also take on any debts or contracts, so be sure to do your research.

Who can hold a Washington marijuana retailer license?

You have to be at least 21 years old and have been a Washington resident for at least 6 months. Business entities (like LLCs and corporations) can hold licenses as well, but the entity must have been formed in Washington and all members in the business must have been residents for at least 6 months. All licensees have to maintain their residency for as long as they hold their licenses.

Can I have a Washington marijuana retailer license and a marijuana producer or processor license?

No. If you grow or process marijuana, you can’t also have a retailer license.

Can I have more than one Washington marijuana retailer license?

Yes, within limits. You can only hold up to three retail licenses as long as that means you still have fewer than 33% of the allowed licenses in your city or county.

Is there a limit on the number of marijuana retailer licenses the WSLCB can issue?

Yes, the WSLCB can license up to 334 cannabis retail stores statewide—although fewer than 100 licenses have been issued. (These numbers are for recreational stores, not those with medical marijuana endorsements.) There are also caps per county and city. To see what’s authorized in your county or city, see the link below.

Does Washington require that my cannabis shop have a particular kind of insurance?

Yes. Washington requires that you carry a commercial general liability insurance policy provided by a carrier with a rating of no less than A—Class VII. The WSLCB has to be listed as an additional insured on all of your general liability, umbrella, and excess insurance policies.

What kind of security requirements does Washington have for cannabis shops?

Your marijuana shop must meet the following security requirements, according to the I-502 rules:

ID Badges: All employees on licensed premises must hold and properly display an employer-issued ID badge at all times while at work.

Alarm System: At a minimum, you need a security alarm system on all perimeter entry points and windows.

Surveillance: At bare minimum, your shop needs to install a video surveillance camera with a resolution of no less than 640×470 pixels, and the system needs to be Internet Protocol (IP) compatible. All cameras need to be running 24 hours a day and be able to identify customers on the premises and any individuals approaching any of the building’s entrance points at no less than 20 feet from the premises. Retailers need to keep copies of all footage on the premises for at least 45 days.

Traceability: You must keep extensive record of all inventory and upload records in the state’s database.

How do I legally transport marijuana between licensed facilities?

For a common carrier to transport marijuana between licensed facilities (like a processing facility and retail store), you’ll need a Marijuana Transportation License from the WSLCB. The license fee is $250.

What other permits does my marijuana business need?

Besides standard business permits, pot shops may find they need permits specific to marijuana retailing. For example, the City of Kenmore charges $500 a year for their annual Marijuana Business License.

How can Northwest Registered Agent help me?

We can serve as your registered agent and receive all official mail and service of process for your business, as well as keep you up to date on all that is required to keep your business active.

Registered agents are required for any business entity registered with the Secretary of State. When you hire Northwest Registered Agent as your registered agent, it’s a flat rate yearly price of $125 a year. You’ll have an online account that tracks your report due dates and when your yearly service with us is up. Any documents we receive locally for you are uploaded into your account immediately for complete viewing. If or when you get served with a lawsuit, we can email up to 4 people and your attorney at the same time for real-time complete viewing of a lawsuit. You’ll receive annual report reminders as well. Our service is the same price every year, and there are no weird fees or cancellation fees.